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Frozen North Korean funds released from Macau bank

HONG KONG (Reuters) - An end to the deadlock stalling a nuclear disarmament deal with Pyongyang came into sight on Thursday after North Korean funds long frozen in a Macau bank were released.

North Korean leader Kim Jong-il (R), flanked by Chief Secretary of the North Phyongyang Provincial Committee of the Workers' Party of Korea Kim Phyong-hae, inspects at the Sinam cooperative farm in Ryongchon county in North Korea, in this undated photo released by Korea News Service in Tokyo June 8, 2007. REUTERS/Korea News Service

“Basically all of it has been transferred ... For Macau, this incident has come to a conclusion,” the Chinese-controlled territory’s government said in a statement.

It said Banco Delta Asia had remitted more than $20 million from dozens of accounts following instructions from several dozen clients in the reclusive communist state.

North Korea has refused to honor a February agreement to begin shutting its Yongbyon nuclear reactor and source of material for atomic weapons until some $25 million at Macau’s Banco Delta Asia are released through normal banking channels.

“The ball is in North Korea’s court and we have to see whether it will promptly implement the first-phase measures agreed on February 13 in Beijing,” said a diplomatic source in Tokyo after news of the funds transfer.

The money was blocked after the United States blacklisted Banco Delta Asia, accusing it of laundering illicit funds for communist North Korea.

Banks had balked at acting as a conduit for the money to be returned to North Korea because of the stigma attached to holding Pyongyang’s assets.

Japan’s Kyodo news agency, citing Macau financial authorities, said the funds were expected to be transferred through the New York branch of the Federal Reserve and Russia’s central bank to a Russian bank where North Korea holds accounts.

Russia said Wednesday it would allow one of its banks to transfer the funds if Washington gave written guarantees it would not fall foul of U.S. sanctions against North Korea.

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Macau Secretary for Economy and Finance Francis Tam told reporters he could not disclose where the money was sent.

Russian Deputy Foreign Minister Alexander Losyukov said the funds were being transferred to “a Russian bank in the Far East,” Interfax reported, after getting firm guarantees from the United States removing the threat of sanctions against the Russian bank involved.

“The guarantees were in writing and move our bank out of the way of any possible American sanctions,” he said.

The unblocking of the money would in effect allow impoverished North Korea -- which conducted its first nuclear test last year -- back into the international banking system from which it is currently ostracized



Under the February agreement struck by the two Koreas, the United States, China, Russia and Japan, Pyongyang is slated to get 50,000 tonnes of heavy fuel oil -- or its equivalent -- once it completes initial steps, including shutting down Yongbyon.

During the next phase of the pact, which includes making a complete declaration of all its nuclear programs and disabling all its nuclear facilities, North Korea will get economic, energy and humanitarian aid up to the equivalent of a further 950,000 tonnes of heavy fuel oil.

China, which chairs the six-country talks on unwinding North Korea’s nuclear arms program, said earlier it was willing to resume negotiations if all parties agreed to do so.

The diplomatic source in Tokyo said the six parties might have to discuss more details about the first-phase steps, such as the verification role of the United Nations’ International Atomic Energy Agency.

U.S. officials said they were not yet able to confirm the transfer had gone through but stressed that they were eager to resume six-party talks.

“Should these transactions be completed, we would hope the North Korean government would live up to its obligations under the February 13 agreement,” said State Department spokesman Sean McCormack.

Assistant Secretary of State Christopher Hill, the top U.S. negotiator in the six-party process, will visit China, Japan and South Korea next week after attending a conference in Mongolia this weekend, the State Department said.

Additional reporting by George Nishiyama in Tokyo, Rhee So-eui in Seoul, Edwin Chan, John Ruwitch and Tan Ee Lyn in Hong Kong, Lindsay Beck in Beijing and Arshad Mohammed in Washington